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UAL's corporate restructuring opposed by Pension Benefit Guaranty Corp.
By Ellen Chang
Houston, March 14 - UAL Corp.'s plan for a corporate restructuring drew an objection from the Pension Benefit Guaranty Corp., which said it would change the rights of creditors, according to a Friday filing with the U.S. Bankruptcy Court for the Northern District of Illinois.
The federal pensions regulator said the court should not give permission because the modifications to UAL's corporate structure would "effectively reorganize a major debtor without satisfying the requirements for a Chapter 11 confirmation."
Pension Benefit Guaranty Corp. described UAL's proposal as "a sub rosa plan that the court is without authority to approve" and added that there is no sound business reason for the transaction.
The Chicago-based airline had requested permission for the "inter-debtor equity contribution," saying the transactions would allow it to focus on its core business and simplify the financial reporting of its ancillary business. These reasons are "vague and speculative," Pension Benefit Guaranty Corp. said.
The regulator added: "Even assuming these reason were sound, the debtors fail to explain how the inter-debtor transactions will achieve them."
The transactions would restructure the rights of creditors of ULS, MyPoints and Confetti.
The company also fails to show why the corporate restructuring must be achieved how rather than through a plan or reorganization, the PBGC filing said.
UAL is proposing that UAL Loyalty Services transfer its Club Business Assets to Confetti, Inc., then UAL Loyalty Services would transfer the Confetti stock to MyPoints.com, Inc.
UAL Loyalty Services would pay as a dividend to UAL the stock of MyPoints.com and UAL would contribute the stock of UAL Loyalty Services to United Air Lines, Inc.
A hearing is scheduled for March 18.
UAL filed for bankruptcy on Dec. 9, 2002. Its Chapter 11 case number is 02-48191.
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